Contents. Tables to the Interim Report

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2 Contents Historically low hydro volumes impacted the results, partly offset by higher power prices 3 Fortum President and CEO Pekka Lundmark s comments 4 Uniper investment 5 Financial results 5 Financial position and cash flow 7 Segment reviews 9 Capital expenditures, divestments, and investments in shares 16 Operating and regulatory environment 18 Key drivers and risks 20 Outlook 21 Shares and share capital 25 Group personnel 26 Changes in Fortum's Management 26 Research and development 26 Sustainability 26 Events after the balance sheet date 29 Tables to the Interim Report Condensed consolidated income statement 31 Condensed consolidated balance sheet 33 Condensed consolidated statement of changes in total equity 34 Condensed consolidated cash flow statement 35 Change in net debt 37 Key ratios 38 Notes to the condensed consolidated interim financial statements 39 Definition of key figures 60 Market conditions and achieved power prices 64 Fortum's production and sales volumes 65 Figures in brackets refer to the comparison period, i.e. the same period last year, unless otherwise stated. 2 (66)

3 January-September Interim Report 24 October at 9:00 EEST Historically low hydro volumes impacted the results, partly offset by higher power prices July-September Comparable EBITDA was EUR 230 (210) million, +10%, including EUR 26 million profit from selling a 54% share of Fortum's Indian solar power plants Comparable operating profit was EUR 96 (94) million, +2%, including EUR 26 million Indian solar profit Earnings per share were EUR 0.05 (0.40), of which EUR (0.34) related to items affecting comparability Cash flow from operating activities totalled EUR 133 (185) million January-September Comparable EBITDA was EUR 1,051 (852) million, +23% Comparable operating profit was EUR 654 (516) million, +27% Earnings per share were EUR 0.73 (0.70), of which EUR 0.17 (0.37) related to items affecting comparability, including capital gains of EUR 0.09 from the sale of the 10% stake in Hafslund Produksjon. In, the impact from a Swedish income tax case was EUR Cash flow from operating activities totalled EUR 767 (699) million Summary of outlook The Generation segment's Nordic generation hedges: approximately 80% hedged at EUR 30 per MWh for the remainder of, approximately 65% at EUR 30 per MWh for 2019, and approximately 35% hedged at EUR 28 per MWh for 2020 Capital expenditure, including maintenance but excluding acquisitions, expected to be in the range of EUR million in Key financial ratios LTM Return on capital employed, % Comparable net debt/ebitda (66)

4 Key figures EUR million or as indicated III/18 III/17 I-III/18 I-III/17 LTM Sales ,643 3,088 4,520 5,075 Comparable EBITDA , ,275 1,474 Comparable operating profit Operating profit ,158 1,144 Share of profits of associates and joint ventures Profit before income taxes ,111 1,079 Earnings per share, EUR Net cash from operating activities ,061 Shareholders equity per share, EUR Interest-bearing net debt (at the end of the period) 5,244 1, Fortum's President and CEO Pekka Lundmark: "The third quarter was characterised by warm and dry weather. Following the dry weather in previous quarters, the Nordic hydro reservoirs further declined compared to the normal level, and the deficit was most prominent in the Swedish reservoirs. This heavily affected Fortum's hydro production volumes, which were historically low, and burdened the results. During the last weeks of the quarter the reservoir levels increased only in Norway. Power, emission, and commodity prices were volatile during the quarter. Nordic power prices increased on the dry weather and rising commodity and emissions prices, but decreased at the end of the quarter on the increasing precipitation. The Generation division s achieved power price rose, but it was not enough to compensate for the all-time low hydro volumes. The operative performance of City Solutions and Consumer Solutions was at last year's level, while the performance of the Russia division improved. Since becoming the largest shareholder in Uniper, Fortum aims to create shareholder value for both companies. Fortum s CFO Markus Rauramo has taken on his position in the Supervisory Board of Uniper and has been elected as Vice Chairman. In October the Intergovernmental Panel on Climate Change published its report on limiting global warming to 1.5 C, highlighting the urgency of determined actions to curb emissions. The message is clear: we need to reach global carbon neutrality by 2050, the power sector should reduce emissions by 100% well before 2050, 70-85% of electricity should come from renewables, and nuclear will play a bigger role. Fortum calls for an ambitious EU climate strategy. A stable, visionary, and long-term political framework for the economy is a prerequisite for European businesses investing in low-carbon technologies to remain competitive in the global market. We continue to be committed to investing in new emission-reducing energy production, as demonstrated by our inauguration of a multi-fuel CHP plant in Zabrze, Poland, and the Solberg wind power park in Sweden during the third quarter. Finally, I would like to wish a warm welcome to Arun Aggarwal, our new member of the Fortum Executive Management. Arun has an impressive track record in digital transformation and IT leadership and will help Fortum become a digital winner in the ongoing transformation of the energy sector." 4 (66)

5 Uniper investment In September, Fortum announced it had signed a transaction agreement with E.ON under which E.ON had the right to decide to tender its 46.65% shareholding in Uniper SE into Fortum s public takeover offer (PTO). In November, Fortum launched a voluntary public takeover offer to all Uniper shareholders at a total value of EUR 22 per share, implying a premium of 36% to the price prior to intense market speculation on a potential transaction at the end of May. In February, Fortum announced that shareholders representing 47.12% of the shares in Uniper had accepted the offer. The PTO was conditional to regulatory and merger control approvals in several countries. During the second quarter, Fortum received the required clearances in Russia under the Strategic Investment Law as well as Competition Law. The clearances allow Fortum the acquisition of up to 50% of shares and voting rights in Uniper. During the second quarter, Fortum also received an unconditional merger clearance decision from the European Commission. Clearances in the United States and South Africa had already been granted earlier. On 26 June, Fortum closed the offer and became the largest shareholder in Uniper with 47.35% of the shares. Fortum paid a total consideration of EUR 3.7 billion for all shares tendered (EUR per share). The total consideration was financed with existing cash resources of EUR 1.95 billion and bridge loan financing from committed credit facilities of EUR 1.75 billion. The share of Uniper's profit will contribute to the EPS and dividends to the cash flow of Fortum. As a result of this transaction, Fortum s leverage rose above Fortum's long-term target level for net debt/ebitda ratio of around 2.5x. Over time, however, Fortum expects its cash generation in combination with the dividend from Uniper to reduce this ratio towards the stated target. Fortum consolidated Uniper as an associated company from 30 June. The total acquisition cost, including direct costs relating to the acquisition, is reported in 'Participations in associated companies and joint ventures'. The purchase price allocation will be completed within the one-year window from the acquisition date, according to IFRS. As Uniper publishes its interim reports later than Fortum, Fortum's share of Uniper's results will be accounted for with a time-lag of one quarter, with potential adjustments. Fortum s third-quarter interim report does not include any share of results from Uniper. Fortum s Financial Statements will only include Fortum s share of Uniper's third-quarter results (Note 6). Uniper will report its third-quarter results on 13 November. Financial results Sales by segment EUR million III/18 III/17 I-III/18 I-III/17 LTM Generation ,282 1,243 1,677 1,716 City Solutions ,015 1,077 Consumer Solutions , ,097 1,657 Russia ,101 1,079 Other Operations Netting of Nord Pool transactions Eliminations Total ,643 3,088 4,520 5,075 5 (66)

6 Comparable EBITDA by segment EUR million III/18 III/17 I-III/18 I-III/17 LTM Generation City Solutions Consumer Solutions Russia Other Operations Total , ,275 1,474 Comparable operating profit by segment EUR million III/18 III/17 I-III/18 I-III/17 LTM Generation City Solutions Consumer Solutions Russia Other Operations Total Operating profit by segment EUR million III/18 III/17 I-III/18 I-III/17 LTM Generation City Solutions Consumer Solutions Russia Other Operations Total ,158 1,144 July-September Fortum's sales increased by 6%, mainly due to the consolidation of Hafslund. Comparable operating profit increased by 2%, as a result of the higher achieved power price, lower real-estate and capacity taxes in Swedish hydro and nuclear power plants, as well as the profit from the sale of a 54% share of Fortum's Indian solar power plants. The results were heavily burdened by the all-time low hydropower volumes. Operating profit for the period decreased due to EUR -5 (293) million of items affecting comparability, including the fair value change of non-hedge accounted derivatives and nuclear fund adjustments. In, the items affecting comparability included a one-time capital gain of EUR 324 million from the divestment of Hafslund ASA (Note 4). The share of profit from associates and joint ventures was EUR 12 (21) million, of which Stockholm Exergi (formerly Fortum Värme) accounted for EUR 3 (-5) million and TGC-1 accounted for EUR 9 (8) million. The share of profit from TGC-1 is based on the company s published second-quarter interim report (Note 11). In the comparison period, the share of profit from Hafslund ASA, divested in August, amounted to EUR 9 million. 6 (66)

7 January-September Fortum's sales increased by 18%, mainly reflecting the consolidation of Hafslund. Comparable operating profit increased by 27%, mainly as a result of the higher achieved power price, the positive impact from the consolidation of the acquired Hafslund businesses, lower real-estate and capacity taxes in Swedish hydro and nuclear power plants, higher received Capacity Supply Agreement (CSA) payments in Russia, as well as the profit from the sale of a 54% share of Fortum's Indian solar power plants. The result improvement was partly offset by the very low hydro production volumes in the third quarter and the weaker Russian rouble. Operating profit for the period was positively impacted by EUR 175 (327) million of items affecting comparability, including the fair value change of non-hedge accounted derivatives, capital gains, and nuclear fund adjustments. In, the items affecting comparability included a one-time capital gain of EUR 324 million from the divestment of Hafslund ASA (Note 4). The share of profit from associates and joint ventures was EUR 82 (114) million, of which Stockholm Exergi (formerly Fortum Värme) accounted for EUR 40 (40) million and TGC-1 accounted for EUR 38 (28) million. The share of profit from TGC-1 is based on the company s published fourth-quarter and firstand second-quarter interim reports (Note 11). In the comparison period, the share of profit from Hafslund ASA, divested in August, amounted to EUR 40 million. Net finance costs amounted to EUR 132 (146) million. Profit before income taxes was EUR 779 (811) million. Taxes for the period totalled EUR 118 (186) million. The effective income tax rate according to the income statement was 15.1% (22.9%). The comparable effective income tax rate, excluding the impact of the share of profit from associated companies and joint ventures, non-taxable capital gains, tax rate changes and other major one-time income tax effects was 21.2% (19.1%) (Note 7). The profit for the period was EUR 661 (625) million. Earnings per share were EUR 0.73 (0.70), of which EUR 0.17 (0.37) per share was related to items affecting comparability, including capital gains of EUR 0.09 from the sale of the 10% stake in Hafslund Produksjon. In the comparison period in, the impact from a Swedish income tax case was EUR Financial position and cash flow Cash flow In January-September, net cash from operating activities increased by EUR 68 million to EUR 767 (699) million, mainly due to an increase in comparable EBITDA of EUR 199 million and an increase of realised foreign exchange gains and losses of EUR 277 million, partly offset by the negative effect of a EUR 389 million increase in working capital. The foreign exchange gains and losses of EUR 205 (-72) million relate to the rollover of foreign exchange contract hedging loans to Russian and Swedish subsidiaries. The EUR -263 (126) million change in working capital was mainly due to the effect of the daily cash settlements for futures in Nasdaq OMX Commodities Europe (Additional cash flow information). Capital expenditure decreased by EUR 76 million to EUR 394 (470) million. Acquisition of shares was EUR 3,913 (929) million, mainly related to the Uniper transaction (Note 6). The impact of divestment of shares was EUR 258 (740) million resulting from the sale of the 10% stake in Hafslund Produksjon and a 54% share of solar plants in India. Acquisitions and divestments in were mainly related to the Hafslund transaction. Net cash used in investing activities increased to EUR 4,107 (611) million and included the EUR 87 (24) million impact from the increase in cash collaterals given as trading collaterals to commodity exchanges and other restricted cash. 7 (66)

8 Cash flow before financing activities was EUR -3,340 (88) million. Proceeds from long-term liabilities were EUR 1,764 (35) million, including the bridge loan financing from committed credit facilities for the acquisition of Uniper shares. Payments of long-term liabilities totalled EUR 553 (467) million, including the repayment of bonds of EUR 413 million. The dividend payment for was EUR 977 million. The net decrease in liquid funds was EUR 3,138 (1,261) million. Assets and capital employed At the end of the reporting period, total assets amounted to EUR 22,082 million (end of : EUR 21,753 million). Liquid funds at the end of the period amounted to EUR 731 million (end of : EUR 3,897 million). Capital employed was EUR 18,201 million (end of : EUR 18,172 million). Equity Equity attributable to owners of the parent company totalled EUR 11,986 million (end of : EUR 13,048 million). The decrease of EUR 1,062 million was mainly due to the dividend payment for of EUR 977 million, the impact from fair valuation of cash flow hedges of EUR -374 million and translation differences of EUR -390 million, partly offset by the net profit for the period of EUR 651 million. The dividend for of EUR 1.10 per share was approved by the Annual General Meeting on 28 March and paid on 10 April. Financing Net debt increased by EUR 4,256 million to EUR 5,244 million (end of : EUR 988 million), mainly due to the closing of the Uniper offer in the latter part of the second quarter. At the end of the reporting period, the Group s liquid funds totalled EUR 731 million (end of : EUR 3,897 million). Liquid funds include cash and bank deposits held by PAO Fortum amounting to EUR 289 million (end of : EUR 246 million). In addition to liquid funds, Fortum s undrawn committed credit facilities totalled EUR 1.8 billion (Note 13). Net financial expenses totalled EUR 132 (146) million, of which net interest expenses were EUR 84 (96) million. On 12 September, Fortum received information from Nasdaq Commodities that it had closed-out the positions of a clearing member and that the funds from the commodity member default fund had been utilised to cover the loss. Fortum is trading on Nasdaq Commodities and is a member of the default fund. On 13 September, Nasdaq requested the members of the default fund to replenish their contribution in the fund. Fortum's participation in the default fund was approximately EUR 30 million and the requested replenishment was approximately EUR 20 million. Consequently, Fortum booked approximately EUR 20 million in its third quarter results as a financing cost. In January, Standard & Poor's downgraded Fortum's long-term credit rating from BBB+ to BBB with Negative Outlook. The short-term rating was affirmed at level A-2. In June, Fitch Ratings downgraded Fortum's long-term credit rating from BBB+ to BBB with Stable Outlook. The short-term rating was downgraded to level F3. 8 (66)

9 Key figures At the end of the reporting period, the comparable net debt to EBITDA ratio for the last 12 months was 3.6x (end of : 0.8x), which is above the long-term over-the-cycle target of approximately 2.5x. Gearing was 43% (end of : 7%) and the equity-to-assets ratio 55% (end of : 61%). Equity per share was EUR (end of : 14.69). Return on capital employed (ROCE) for the last twelve months was 7.0% (end of : 7.1). Fortum targets a long-term over-the-cycle return on capital employed of at least 10%. Segment reviews Generation The Generation segment comprises power production in the Nordics, including nuclear, hydro, and thermal power production, power portfolio optimisation, trading, industrial intelligence, as well as nuclear services globally. EUR million III/18 III/17 I-III/18 I-III/17 LTM Sales ,282 1,243 1,677 1,716 - power sales ,253 1,221 1,649 1,681 of which Nordic power sales* , ,342 1,356 - other sales Comparable EBITDA Comparable operating profit Operating profit Share of profits from associates and joint ventures (Note 11)** Comparable net assets (at period-end) 5,912 5,727 5,672 Comparable return on net assets, % Capital expenditure and gross investments in shares Number of employees 1,121 1,065 1,035 * The Nordic power sales income and volume includes hydro and nuclear generation. It does not include thermal generation, minorities, customer business, or other purchases. ** Power plants are often built jointly with other power producers, and owners purchase electricity at cost, including interest cost and production taxes. The share of profit/loss is mainly IFRS adjustments (e.g. accounting for nuclear-related assets and liabilities) and depreciations on fair-value adjustments from historical acquisitions (Note 18 in the consolidated financial statements ). Power generation by source TWh III/18 III/17 I-III/18 I-III/17 LTM Hydropower, Nordic Nuclear power, Nordic Thermal power, Nordic Total Nordic sales volumes TWh III/18 III/17 I-III/18 I-III/17 LTM Nordic sales volume of which Nordic power sales volume* * The Nordic power sales income and volume includes hydro and nuclear generation. It does not include thermal generation, minorities, customer business, or other purchases. 9 (66)

10 Achieved power price EUR/MWh III/18 III/17 I-III/18 I-III/17 LTM Generation's Nordic power price* * Generation s Nordic power price includes hydro and nuclear generation. It does not include thermal generation, minorities, customer business, or other purchases. July-September The Generation segment's total power generation in the Nordic countries decreased clearly due to 2.1 TWh lower hydro generation caused by very low inflows and reservoir levels. The hydro generation volumes were the lowest in Fortum's history with the current asset base. Nuclear power generation increased slightly. The CO2-free production accounted for 100% (100%) of the total power production. The achieved power price in the Generation segment increased by 6% due to higher spot and hedge prices. Comparable operating profit decreased by 33% due to the very low hydropower production volumes, partly offset by the higher achieved power price and lower real-estate tax in the Swedish hydro power plants. Operating profit was affected by EUR -25 (-30) million of fair value change of non-hedge accounted derivatives and nuclear fund adjustments (Note 4). January-September The Generation segment's total power generation in the Nordic countries decreased due to lower hydropower volumes in the third quarter and the lower nuclear power generation resulting from the closure of Oskarshamn 1 in June. The CO2-free production accounted for 100% (98%) of the total power production. The achieved power price in the Generation segment increased by 6% due to higher spot and hedge prices. Comparable operating profit increased by 39%, driven by the higher achieved power price and lower realestate and capacity taxes in Swedish hydro and nuclear power plants, partly offset by lower hydro and nuclear production volumes. Operating profit was positively affected by EUR 112 (21) million of capital gains, fair value change of nonhedge accounted derivatives, and nuclear fund adjustments (Note 4). In June, Fortum sold its 10% ownership in Hafslund Produksjon and booked a one-time tax-free capital gain of EUR 77 million in the Generation segment's results. 10 (66)

11 City Solutions City Solutions develops sustainable solutions for urban areas into a growing business for Fortum. The segment comprises heating and cooling, waste-to-energy, operation and maintenance services, biomass, and other circular economy solutions. The business operations are located in the Nordics, the Baltic countries, and Poland. The segment also includes Fortum s 50% holding in Stockholm Exergi (formerly Fortum Värme), which is a joint venture and is accounted for using the equity method. EUR million III/18 III/17 I-III/18 I-III/17 LTM Sales ,015 1,077 - heat sales power sales waste treatment sales* other sales** Comparable EBITDA Comparable operating profit Operating profit Share of profits from associates and joint ventures (Note 11) Comparable net assets (at periodend) 3,688 3,705 3,728 Comparable return on net assets, % Capital expenditure and gross investments in shares Number of employees 1,932 1,925 1,907 * Waste treatment sales comprise gate fees at waste treatment plants and environmental construction services. ** Other sales comprise mainly operation and maintenance services and fuel sales. Heat sales by country TWh III/18 III/17 I-III/18 I-III/17 LTM Finland Poland Norway Other countries Total Power sales by country TWh III/18 III/17 I-III/18 I-III/17 LTM Finland Poland Other countries Total On 4 August, Fortum concluded the restructuring of its ownership in Hafslund. As of 1 August, Fortum's 50% ownership in Fortum Oslo Varme (the combined company of Hafslund's Heat business area and Klemetsrudanlegget) has been consolidated as a subsidiary to Fortum in the results of City Solutions. July-September The heat sales volume decreased by 10% due to the warmer weather in all heating areas. 11 (66)

12 Comparable operating loss increased slightly due to the change to seasonal heat pricing in Finland. The third quarter is typically a weaker quarter for City Solutions, as heating volumes are low. The effect of the consolidation of Fortum Oslo Varme was EUR -11 (-6) million. These negative impacts were partly compensated by improved operative results. The consolidation of Fortum Oslo Varme had an effect of EUR -3 (-1) million on the comparable EBITDA. Operating profit was affected by EUR -1 (0) million of fair value change of non-hedge accounted derivatives (Note 4). January-September The heat sales volume increased by 13% mainly due to the consolidation of Fortum Oslo Varme. The negative impact of the warm weather in the second quarter offset the positive effects of the cold weather in the first quarter. Comparable operating profit increased by 19%. The positive effect of EUR 19 (-6) million of the consolidation of Fortum Oslo Varme and the good result in the first quarter was partly offset by higher fuel prices in the first quarter, the lower second-quarter heat and power sales volumes, the change to seasonal heat pricing in Finland, and a weaker result in the recycling and waste business in the second quarter. The seasonality of the City Solutions business has increased due to the consolidation of Fortum Oslo Varme and the new seasonal pricing. The annual effect of the seasonal pricing is expected to be neutral. The consolidation of Fortum Oslo Varme had a positive effect of EUR 43 (-1) million on the comparable EBITDA. Operating profit was positively affected by EUR 8 (1) million of fair value change of non-hedge accounted derivatives (Note 4). Consumer Solutions Consumer Solutions comprises electricity and gas retail businesses in the Nordics and Poland, including the customer service, invoicing, and debt collection business. Fortum is the largest electricity retailer in the Nordics with approximately 2.5 million customers across different brands in Finland, Sweden, Norway, and Poland. The business provides electricity and related value-added products as well as new digital customer solutions. EUR million III/18 III/17 I-III/18 I-III/17 LTM Sales , ,097 1,657 - power sales , ,426 - other sales Comparable EBITDA Comparable operating profit Operating profit Comparable net assets (at period-end) Capital expenditure and gross investments in shares Number of employees 1,406 1,525 1, (66)

13 Sales volumes TWh III/18 III/17 I-III/18 I-III/17 LTM Electricity* ** 30.1 Gas* ** ** * Not including wholesale volumes. ** Corrected figure. Incorrect figures were published in the half-year financial report. The gas sales volume in the second quarter was 0.7 TWh. Number of customers Thousands* III/18 III/17 Electricity 2,450 2,470 2,470 Gas Total 2,470 2,480 2,490 * Rounded to the nearest 10,000. On 4 August, Fortum concluded the restructuring of its ownership in Hafslund. As of 1 August, Hafslund Markets has been consolidated into the results of Consumer Solutions. July-September The electricity sales volume increased by 17% mainly due to the consolidation of Hafslund. Sales increased mainly because of the increasing spot prices. The competition and customer churn in the Nordic market continued to be a challenge. Comparable operating profit increased slightly. The effect of the consolidation of Hafslund was EUR 4 (1) million. The consolidation of Hafslund had a positive effect of EUR 14 (5) million on the comparable EBITDA. The implementation of IFRS 15 had a positive effect of EUR 9 million on the comparable EBITDA due to the capitalisation of sales commissions. EUR 6 million of the IFRS 15 effect was related to the Hafslund operations. Operating profit was positively affected by EUR 19 (10) million of fair value change of non-hedge accounted derivatives (Note 4). January-September The consolidation of Hafslund and the cold weather in February and March increased the electricity sales volume and, consequently, sales for the segment. The competition and customer churn in the Nordic market continued to be a challenge. Comparable operating profit increased by 57%. The effect of the consolidation of Hafslund was EUR 24 (1) million. The profitability was burdened by lower sales margins and the amended service agreements for the divested electricity distribution companies. The consolidation of Hafslund had a positive effect of EUR 54 (5) million on the comparable EBITDA. Due to the capitalisation of sales commissions, the implementation of IFRS 15 had a positive effect of EUR 23 million on the comparable EBITDA. EUR 16 million of the IFRS 15 effect was related to the Hafslund operations. Operating profit was positively affected by EUR 28 (-9) million of fair value change of non-hedge accounted derivatives (Note 4). 13 (66)

14 Russia The Russia segment comprises power and heat generation and sales in Russia. The segment also includes Fortum s over 29% holding in TGC-1, which is an associated company and is accounted for using the equity method. EUR million III/18 III/17 I-III/18 I-III/17 LTM Sales ,101 1,079 - power sales heat sales other sales Comparable EBITDA Comparable operating profit Operating profit Share of profits from associates and joint ventures (Note 11) Comparable net assets (at periodend) 2,853 3,117 3,161 Comparable return on net assets, % Capital expenditure and gross investments in shares Number of employees 3,471 3,738 3,495 Russian power generation and heat production TWh III/18 III/17 I-III/18 I-III/17 LTM Russian power generation Russian heat production Key electricity, capacity, and gas prices for Fortum Russia III/18 III/17 I-III/18 I-III/17 LTM Electricity spot price (market price), Urals hub, RUB/MWh 1,059 1,080 1,025 1,042 1,041 1,028 Average regulated gas price, Urals region, RUB/1000 m 3 3,812 3,755 3,774 3,661 3,685 3,769 Average capacity price for CCS and other, trub/mw/month* ** Average capacity price for CSA, trub/mw/month** , ,021 Average capacity price, trub/mw/month Achieved power price for Fortum in Russia, RUB/MWh 1,884 1,790 1,854 1,801 1,813 1,852 Achieved power price for Fortum in Russia, EUR/MWh*** * Including capacity receiving payments under "forced mode status", regulated tariffs, and bilateral agreements. ** Capacity prices paid for the capacity volumes, excluding unplanned outages, repairs, and own consumption. *** Translated using the average exchange rate. 14 (66)

15 The Chelyabinsk GRES unit 3 was commissioned in November. Fortum's 35-MW wind power plant was commissioned in January, and the 35-MW solar plants have been consolidated since December. July-September The power generation volumes increased due to the commissioning of the Chelyabinsk GRES unit 3 and good availability. Sales remained stable. The negative effect of the weaker Russian rouble was compensated by higher received CSA payments and higher power sales volumes. For further information on CSA payments, see Key drivers and risks and Outlook. Comparable operating profit increased by 54%. The result increased due to higher CSA payments, improved bad-debt collection, and new production units, partly offset by the change in the Russian rouble exchange rate and lower electricity margins. The increase in CSA payments was related to Nyagan 1 and Nyagan 2 receiving higher payments for the last years of the CSA period, positive spot market corrections, and contributions from renewable generation. The increase in CSA payments was partly offset by the corrections due to lower bond yields. The effect of the change in the Russian rouble exchange rate was EUR -4 million. January-September The power generation volumes increased due to the commissioning of the Chelyabinsk GRES unit 3 and good availability. Heat production volumes increased due to cold weather. Power generation volumes in the first quarter of were lower due to a maintenance outage at the Nyagan power plant. Sales decreased due to the weaker Russian rouble, partly offset by higher received CSA payments and higher power and heat sales volumes. Comparable operating profit decreased by 14%. The new production units and higher received CSA payments had a positive effect on the results. The result was negatively impacted by bad-debt provisions and lower electricity margins. The increase in CSA payments was related to Nyagan 1 and Nyagan 2 receiving higher payments for the last years of the CSA period, positive spot market corrections, and contributions from renewable generation. The increase in CSA payments was partly offset by the corrections due to lower bond yields. The result for the comparison period in was positively affected by a one-time item from improved bad-debt collections. The effect of the change in the Russian rouble exchange rate was EUR -22 million. Other Operations Other Operations comprises the two development units 'M&A and Solar & Wind Development' and 'Technology and New Ventures' as well as corporate functions. Other Operations also includes Fortum's shareholding in Uniper, which is consolidated as an associated company as of 30 June (Note 6). The total acquisition cost for Uniper, including direct costs relating to the acquisition, is reported in 'Participations in associated companies and joint ventures'. The purchase price allocation will be completed within the one-year window from the acquisition date, according to IFRS. As Uniper publishes its interim reports later than Fortum, Fortum's share of Uniper's results will be accounted for with a time-lag of one quarter, with potential adjustments. Fortum s third-quarter interim report does not include any share of results from Uniper. Fortum s Financial Statements will only include Fortum s share of Uniper's third-quarter results (Note 6). Uniper will report its third quarter results on 13 November. 15 (66)

16 In June, Fortum agreed to sell a 54% share of its solar power company operating four solar power plants in India. The transaction was closed in August. The total consideration from the divestment on a debt- and cash-free basis, including the effect of deconsolidating Fortum's minority part of the net debt, was EUR 147 million. The positive impact on Fortum's third quarter comparable operating profit was EUR 26 million. Fortum s capital recycling business model enables Fortum to efficiently utilise its key competences to develop, construct and operate power plants while utilising partnerships and other forms of cooperation to create a more asset-light structure and thereby enable more investments into building new renewable capacity. Profits from the capital recycling business model are presented in comparable operating profit because the business results are realised through divesting the shareholding, either partially or totally. Capital expenditures, divestments, and investments in shares In the third quarter of, capital expenditures and investments in shares totalled EUR 316 (1,124) million, including the purchase of Uniper shares (Note 6). Capital expenditures were EUR 160 (174) million (Note 4). In January-September, capital expenditures and investments in shares totalled EUR 4,305 (1,484) million, mainly due to the purchase of Uniper shares. Capital expenditures were EUR 385 (482) million (Note 4). Fortum expects to start power and heat production capacity of new power plants and to upgrade existing plants as follows: Electricity capacity, MW Heat capacity, MW Supply starts/started Type Generation Loviisa, Finland Nuclear 6 Hydro plants in Sweden and Finland Hydro ~12 City Solutions Zabrze, Poland CHP Q4/ Kivenlahti, Finland Bio HOB* Russia Ulyanovsk Wind 35 Jan Solar** Solar Other Operations Ånstadblåheia, Norway Wind 50 Q4/ Sørfjord, Norway Wind Pavagada 2, India Solar * Biofuel-fired heat-only boiler (HOB). ** Separate investment decision needed. Generation Through its interest in Teollisuuden Voima Oyj (TVO), Fortum is participating in the building of Olkiluoto 3 (OL3), a 1,600-MW nuclear power plant unit in Finland. According to the time plan updated by plant supplier Areva-Siemens Consortium in June, the plant is expected to start regular electricity production in September According to TVO, the time plan will be further updated by the supplier in December. TVO cannot estimate whether or not the schedule will influence the start of regular 16 (66)

17 electricity production. OL3 is funded through external loans, share issues and shareholder loans according to shareholder agreements between the owners and TVO. As a 25% shareholder in OL3, Fortum has committed to funding of the project pro rata. At the end of September, Fortum's outstanding receivables regarding OL3 were EUR 170 million and the outstanding commitment was EUR 63 million (Note 12). In March, TVO and the supplier consortium companies signed a comprehensive settlement agreement whereby the arbitration concerning the delay of OL3 is settled by financial compensation of EUR 450 million to be paid to TVO. Based on the project schedule and the effect of the settlement agreement, TVO estimated the total investment in OL3 to be approximately EUR 5.5 billion. In June, Fortum sold its 10% ownership in Hafslund Produksjon Holding AS to Svartisen Holding AS. As part of the restructuring of the Hafslund ownership in, Fortum acquired the ownership in Hafslund Produksjon. The sales price for the shares was EUR 160 million. Fortum booked a capital gain of EUR 77 million in the Generation segment in the second-quarter results. City Solutions On 23 October, Fortum announced it is replacing part of its fossil-based heat production by building a biofuel-fired heating facility in Kivenlahti, Finland. The value of the investment is over EUR 40 million. The new facility will have a maximum heat output of 58 MW. The construction of the plant is a significant step towards carbon neutral district heating production in Espoo, as the plant will allow for the decommissioning of the old coal-fired heating boiler in Suomenoja. Construction of the new facility starts in November, and heat production is scheduled to begin in The joint venture Kauno Kogeneracinė Jėgainė, owned by Fortum and Lietuvos Energija, is building a waste-to-energy combined heat and power (CHP) plant in Kaunas, Lithuania. The electricity capacity of the Kaunas plant will be 24 MW and the thermal capacity approximately 70 MW. Fortum's ownership in the joint venture is 49%. The CHP plant is expected to be commissioned in mid In 2015, Fortum decided to build a new multi-fuel CHP plant in Zabrze, Poland, which primarily will be fuelled by refuse derived fuel (RDF) and coal but can also use biomass and a mixture of fuels. The new plant replaces the existing purely coal-fired units in Zabrze and Bytom. It will have a production capacity of 145 MW of heat and 75 MW of electricity, and the planned start of commercial operations is by the end of. Russia In June, Fortum won the right to build 110 MW of solar capacity in a CSA auction. The power plants are to be commissioned during the years In June, the Fortum-Rusnano wind investment fund (Fortum's ownership 50%) won the right to build 823 MW of wind capacity in a CSA auction. The wind parks are to be commissioned during the years In June, the Fortum-Rusnano wind investment fund won the right to build 1,000 MW of wind capacity in a CSA auction. The wind parks were to be commissioned during the years In October and October, the wind investment fund made investment decisions for the first 50-MW and second 200-MW wind farms. Power production is expected to start during the first half of 2019 and the first half of 2020, respectively. The investment decisions related to the renewable capacities won by Fortum and the Fortum-Rusnano wind investment fund in and are made on a case-by-case basis. Fortum s maximum equity commitment is RUB 15 billion. In the longer term, Fortum seeks to maintain an asset-light structure by forming potential partnerships and other forms of co-operation. 17 (66)

18 Other Operations In June, Fortum won the right to build a 250-MW solar power plant in the Pavagada solar park in Karnataka, India. The capital expenditure is estimated to be approximately EUR 120 million. Commissioning of the plant is expected in Fortum already operates a 100-MW plant in the Pavagada solar park. In June, Fortum signed an agreement to sell a 54% share of its solar power company operating four solar power plants in India to UK Climate Investments (40%) and Elite Alfred Berg (14%). Elite Alfred Berg has the option to buy up to an additional 16% from Fortum. The total capacity of this portfolio is 185 MW. Fortum aims to retain a significant minority ownership in the solar power company and to continue to provide operation and maintenance services based on a long-term agreement. The total consideration from the divestment on a debt- and cash-free basis, including the effect of deconsolidating Fortum's minority part of the net debt, was EUR 147 million. The positive impact on Fortum's third quarter comparable operating profit was EUR 26 million. The transaction was closed in August. In January, Fortum finalised the acquisition of three wind power projects from the Norwegian company Nordkraft. The transaction consists of the already operational Nygårdsfjellet wind farm as well as the fully-permitted Ånstadblåheia and Sørfjord projects. The wind farms are expected to be commissioned in and When built, the total installed capacity of the three wind farms will be approximately 180 MW. In March and September, Fortum announced the decisions to start the building of the Ånstadblåheia and Sørfjord wind farms, respectively. In 2016, Fortum made the final investment decision on the 75-MW Solberg wind park project in northern Sweden. Skellefteå Kraft is participating in the project with a 50% share. The wind park was taken into operation in the first quarter of. Operating and regulatory environment Nordic countries According to preliminary statistics, electricity consumption in the Nordic countries was 82 (82) TWh during the third quarter of. During January-September, electricity consumption in the Nordic countries was 291 (283) TWh. The higher consumption was mainly driven by colder weather during the first quarter of and the somewhat higher industrial consumption. At the beginning of, the Nordic water reservoirs were at 86 TWh, which is 3 TWh above the long-term average and 11 TWh higher than one year earlier. At the end of the third quarter of, the reservoirs were at 89 TWh, which is 13 TWh below the long-term average and 10 TWh lower than one year earlier. The Swedish precipitation was below the normal level in the third quarter of, whereas precipitation in Norway was clearly above the normal level. In the third quarter of, the average system spot price in Nord Pool was EUR 50.5 (28.5) per MWh. The average area price in Finland was EUR 53.5 (35.9) per MWh and in Sweden (SE3, Stockholm) EUR 52.2 (33.6) per MWh. The dry hydrological situation combined with the clearly higher marginal cost for coal condense were the main reasons for the price increase. In January-September, the average system spot price in Nord Pool was EUR 42.8 (29.0) per MWh, the average area price in Finland was EUR 45.9 (33.3) per MWh and in Sweden SE3 (Stockholm) EUR 43.3 (30.3) per MWh. In Germany, the average spot price increased to EUR 53.5 (32.7) per MWh in the third quarter of. In January-September, the average spot price was EUR 41.7 (34.6) per MWh. 18 (66)

19 The market price of CO2 emission allowances (EUA) increased from EUR 15 per tonne at the beginning of the third quarter to EUR 21 per tonne at the end of the third quarter of, peaking at EUR 25 per tonne in mid-september. Russia Fortum operates mainly in the Tyumen and Khanty-Mansiysk area of Western Siberia, where industrial production is dominated by the oil and gas industries, and in the Chelyabinsk area of the Urals, which is dominated by the metal industry. The Russian market is divided into two price zones and Fortum operates in the First Price Zone (European and Urals part of Russia). According to preliminary statistics, Russian electricity consumption was 238 (235) TWh during the third quarter of. The corresponding figure for the First Price Zone was 184 (182) TWh. In January- September, Russian electricity consumption was 770 (756) TWh and the corresponding figure for the First Price Zone was 591 (587) TWh. In the third quarter of, the average electricity spot price, excluding capacity prices, increased to RUB 1,302 (1,269) per MWh in the First Price Zone. The spot price in the Urals hub decreased and was RUB 1,059 (1,080) per MWh. In January-September, the average electricity spot price, excluding capacity price, increased to RUB 1,227 (1,198) per MWh in the First Price Zone and decreased to RUB 1,025 (1,042) per MWh in the Urals hub. More detailed information about the market fundamentals is included in the tables at the end of the report (pages 64-66). European regulatory environment IPCC's special report In early October, the United Nations International Panel on Climate Change (IPCC) released its special report on limiting global warming to 1.5 C. According to the IPCC, this requires rapid and far-reaching transitions including carbon dioxide removal from the atmosphere. Global net CO2 emissions have to decline by 45% from 2010 to 2030 and be net-zero by According to the report, the power sector should reduce emissions by 100% well before % of electricity should be produced from renewable sources and the contribution of nuclear power increases in all scenarios. The IPCC makes explicit references to carbon pricing as a tool to help balance out the impact of higher energy prices in a carbon-constrained world. EU's long-term climate strategy to be published in November The European Commission is expected to publish its strategy for long-term greenhouse gas (GHG) emission reductions in November. The strategy will provide a holistic analysis of various pathways to reach a balance between GHG emissions and carbon sinks across all key sectors of the economy. However, it is not expected to include concrete emission reduction targets or proposals for policy measures. Fortum urges the EU to align its long-term climate ambition with the Paris Agreement, targeting to be carbon neutral by In Fortum s view, carbon pricing will be the key measure for reaching carbon neutrality, and the EU should develop a market mechanism to reward also the capture of CO2 directly from the air or from flue gases. Price development of EU emission allowances The EUA has experienced a significant price increase during the past twelve months. The EUA price has more than tripled to reach the level of that in Given the recent price surge, there has been increasing attention to Article 29 of the EU Emission Trading Scheme (ETS) Directive specifying measures in the event of excessive price fluctuations. According to Article 29, the Commission shall start investigating the 19 (66)

20 issue if, for more than six consecutive months, the allowance price is more than three times the average price of allowances during the two preceding years. If the price evolution does not correspond to changing market fundamentals, the Commission may take measures. In September, Poland officially requested an investigation by the Commission on the EUA price increase, but the Commission has not yet responded to the request. By mid-october, the average EUA price had not exceeded three times the 24-month average price for six consecutive months. Furthermore, in Fortum's view, the price development is predominately based on market fundamentals. Changes in Finnish energy taxation from the beginning of 2019 In the 2019 budget preparation, the Finnish Government decided on several tax changes, mainly targeting fossil heating fuels. The currently applicable 50% CO2 tax reduction for CHP production will be abolished and the structure of the fuel tax will be changed with the aim to improve the competitiveness of gas against coal. At the same time, the Government decided to increase the tax of heating fuels, including peat. As part of the proposal, the Government also intends to abolish the double taxation of electricity storages. The main part of the changes will be applicable from 1 January The changes are expected to have a minor impact on Fortum's results. Finnish coal phase-out legislation The Finnish Government has proposed a ban on the energy use of coal from May Fortum uses coal in the Suomenoja CHP plant for district heating. Fortum has already earlier made a decision to move towards carbon-neutral district heating in Espoo during the 2020s. Although phasing out coal is justified for climate reasons, Fortum considers national laws banning individual technologies or fuels as problematic. The Norwegian Government allocated financing for Fortum's carbon capture and storage pilot project In August, the Norwegian Government decided to finance Fortum Oslo Varme's project for carbon capture and storage as part of the Front End Engineering and Design study. This includes the construction and operation of a pilot unit for the testing of CO2 capture from flue gases at the Klemetsrud plant in Oslo. The study is to be finalised by the end of August In 2020, the Norwegian Parliament is expected to decide on support for the investment in a full-scale carbon capture and storage plant at Klemetsrud. Key drivers and risks Fortum's financial results are exposed to a number of economic, strategic, energy policy and regulation, financial, and operational risks. One of the key factors influencing Fortum's business performance is the wholesale price of electricity in the Nordic region. The key short-term drivers behind the wholesale price development in the Nordic region are the prices of fuels and CO2 emission allowances, the hydrological situation, temperature, economic development, and the electricity import-export balance. Global economic growth impacts commodity and CO2 emission allowance prices, which, in turn, impact the Nordic wholesale price of electricity. In all regions, fuel prices and power plant availability also impact profitability. In addition, increased volatility in exchange rates could have both translation and transaction effects on Fortum's financials, especially through the Russian rouble and Swedish krona. In the Nordic countries, changes in the regulatory and fiscal environment add risks for the energy and environmental management sectors. The main strategic risk is that the regulatory and market environment develops in a way that we have not been able to foresee and prepare for. In response to these uncertainties, Fortum has analysed and assessed a number of future energy market and regulation scenarios, including the impact of these on different generation forms and technologies. As a result, 20 (66)